Bank Reconciliation and Entries

The cash account for Stone Systems at July 31, 20Y5, indicated a balance of $12,800. The bank statement indicated a balance of $15,970 on July 31, 20Y5. Comparing the bank statement and the accompanying canceled checks and memos with the records reveals the following reconciling items:

1. Checks outstanding totaled $5,750.
2. A deposit of $5,990, representing receipts of July 31, had been made too late to appear on the bank statement.
3. The bank had collected $3,110 on a note left for collection. The face of the note was $2,950.
4. A check for $800 returned with the statement had been incorrectly recorded by Stone Systems as $880. The check was for the payment of an obligation to Holland Co. for the purchase of office supplies on account.
5. A check drawn for $300 had been incorrectly charged by the bank as $30.
6. Bank service charges for July amounted to $50.

Required:

1. Prepare a bank reconciliation.

Stone Systems
Bank Reconciliation
July 31, 20Y5
Cash balance according to bank statement		$
Add: Deposit in transit on July 31
Deduct: Outstanding checks	$
Deduct: Bank error in charging check as $30 instead of $300
Total deductions
Adjusted balance		$
Cash balance according to company's records		$
Adjustments:
Add: Note collected by bank, including $160 interest	$
Add: Error in recording check by Stone Systems
Total additions
Deduct: Bank service charges
Adjusted balance		$

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2. Journalize the necessary entries (a.) that increase cash and (b.) that decrease cash. The accounts have not been closed. If an amount box does not require an entry, leave it blank.

20Y5 July 31	Cash
	Notes Receivable
	Interest Revenue
	Accounts Payable-Holland Co.
July 31	Miscellaneous Expense
	Cash

3. If a balance sheet were prepared for Stone Systems on July 31, 20Y5, what amount should be reported as cash? $